Fed’s Dudley Doesn’t See Need for More Easing

Expectations for U.S. economic growth, while “pretty disappointing” at around 2.4%, is sufficient to keep the central bank from easing monetary policy, Federal Reserve Bank of New York President William Dudley said.

“My view is that, if we continue to see improvement in the economy, in terms of using up the slack in available resources, then I think it’s hard to argue that we absolutely must do something more in terms of the monetary policy front,” Dudley said in an interview with CNBC, aired Thursday.

Dudley, a voting member of the Federal Open Market Committee, said the U.S. economy is slowly healing, and that compared with his previous views, he is “a little bit more confident that the economy’s going to keep growing.”

Asked his view of the Fed’s so-called Operation Twist, Dudley said the “best outcome would be the economy looks good, downside risks diminish, inflation is stable.

“You know, if that were the case, I would presume that we would keep policy on hold.”

Regarding news of a J.P. Morgan Chase & Co.’s derivatives losses, Dudley said the central bank would “look at it very closely to see exactly what’s happened there.” Dudley defended the central bank against criticism of inaction, saying preventing mistakes by banks isn’t the Fed’s job.

“Supervision is about ensuring that banks have sufficient capital and liquidity to handle large shocks.

“It’s about ensuring that they have appropriate governance, controls, and risk management systems in place … It’s not to prevent the banks from making mistakes, in any dimension.”

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